Wednesday 31 August 2011

Cable is right, shock

31 August 2011 today. And what a month it has been Gaddafi falling, Irene, a 20% stock market fall, the end of the Euro in sight, to mention just a few events of the past month alone. We are certainly cursed with living in interesting times.

So, perhaps with some perspective saying that Vince Cable is right about something is not the most incredible thing to happen this month. However, I am a trenchant critic of Cable's. Worse I have met the man a couple of times and he is no better in the flesh. His grasp of economics and business is poor considering he is one of the only Lib Dems to ever have had a real job.

Today though, he is trying to be firm on insisting the banking commission regulations about our Banking Sector are enforced. There is lots of speculation as to exactly what will be recommended and lots of FUD from the banks about how much it will hurt them.

They have a small point on the need for international regulation to enable a fair playing field. But apart from that they are just weak with their defence. The main 5 retail banks are so big they played a key role in both blowing up the UK economy in the first place and now in helping to keep the UK on the edge of recession. The Banks also say they are already well buffered from further troubles by all their capital raisings and new regulation already imposed; their shareprices at 12 months lows suggests markets think otherwise.

It is not radical to say that this cosy monopoly must not be allowed to continue and threaten the Country again. I am not in favour of shrinking the financial sector as some kind of suicidal class war stunt, but reducing macro risks to the economy has to be a key plank of Government policy; along with ignoring the siren calls of an overpowerful lobbying effort on the part of the cartel.

We shall see what happens, but noises from Osborne in the past have suggested he agrees with Cable on this in private; which will mean an interesting month ahead again for Bank share prices.

Tuesday 30 August 2011

Is GKP really going to sell itself now?

An article in the Sunday Times (paywall so no link) has suggested that GKP, a highly traded AIM share and decent chunk of my portfolio, are looking to put themselves up for sale. Now, traditionally, these type of announcements are known as Sunday Times RNS - i.e. management use the paper to make statements to market that help to influence share prices. It is a an old practice, hence STRNS as  common refrain in the City.

However, this article relied on Investment Bankers spilling the beans rather than any company executives. So this morning we have the Company itself releasing a statement:

Response to Press Speculation
Gulf Keystone notes the recent press speculation regarding a potential sale of the Company.
Whilst the Board does not normally comment on speculation, the Company confirms that it remains committed to creating value for shareholders, via the continuing 2011/2012 drilling programme on its world-class assets in the Kurdistan Region of Iraq. Whilst there is clearly increasing interest in the region in which Gulf Keystone operates, the Board is not in discussions with regard to a sale of the Company.
Todd Kozel, Executive Chairman and CEO, commented:
"The Board of Gulf Keystone is confident that it has built an enviable asset base in Kurdistan, with significant further upside potential. We are therefore committed to continuing to successfully prove the potential of our oilfields in Kurdistan. We consider the true value of the Company to be significantly above any figures quoted in recent press articles."

So that may be the end of it. What is intriguing though is the bankers are trying to play this up? GKP is sitting on huge assets of oil reserves but without legal clarification from the Government of Iraq the value of the oil can only be speculative. Even as it has built bigger asset base, the share price has been sinking this year.

Clearly, one day the company is going to get bought up and so the bankers, keen on fees, want this to be brought forward into a quiet M&A market. But for the company, it makes no sense to sell until it has a view of the legal settlement and a price it can take as profit for producing the oil it has found - given that current estimates have 400% spreads, pricing it too opaque.

It seems unlikely therefore a deal is near unless GKP have inside knowledge of the progress in the Iraqi parliament:

A) They know the laws will go through this year and so need to line up advisors for a sale in Q3 or Q1 2012.
B) They know the law is going nowhere and think now is a good time to get out,with the management being a few hundred million dollars better off - leave someone else to reap the long-term rewards.

Given that debates about the oil law are common knowledge in Iraq, I doubt either of the above to options. Intriguing nonetheless. All in all, should still be a nice boost to the shareprice over the next few days.

Sunday 28 August 2011

Never let up on tribal politics

Outside of Libya, the economy a some weather in the Atlantic, there has not been much domestic news post Riots.

However, I love this snippet published by the BBC.

Here, Ed Miliband and his fellow travellers are seeking to make some more noise about media regulation. Apparently this is a bad thing all round. Nice to launch it in BBC though; makes it seems as though OK if they are on your side....

Friday 26 August 2011

Trading Update: Tale of Two City's

Never let it be said that we push a consistent party line here. On the one hand, CU shares his up-beat fortunes (and occasional misfortunes) in the equities. I on the other offer doom, gloom and precious metals. In the middle, Mr Q keeps our spirits up with tales from the High Street and the doings of Brownadder.

Following CU's latest update, a quick word about the preciousss. Things were looking toppy at the start of the week, and so it proved. I have come to view silver as the vehicle for in-and-out moves, and for once I sold at the top (having missed that trick on 1 May): the Drew silver account is a bit more than 40% up on the year. As anyone can figure out, that is by no means optimal, proving I am no trader.

But I have left the longstanding gold position in place, and thus missed out on the 20:20-hindsight 10%-in-2-days on offer. Why ?

Because from where I am sitting, gold looks inexorable. Look at the chart (source: 'economicfreefall') - what is a 10% twitch against that trend ? Less than the previous 2 weeks gains, that's what. The bottom line approximates very closely to the 144-day moving average, the significance of which is that silver bottomed on the 144MA after the May massacre, and then resumed its bumpy ascent.

There was, in my view, no way that 2008-9 was just a nasty bout of recession. The only trick up the sleeves of Gordon 'PFI' Brown, or Ben 'helicopter' Bernanke or whomever, is that dealing properly with problems can generally be postponed. For a bit. Theories of what is happening abound: here's one you may care to read.

Sometimes, to quote Brute Anderson from the DTel yesterday, what's needed is "some old-fashioned Tory pessimism".


Thursday 25 August 2011

Take Gaddafi's Compound !

Before I took Gaddafi's Compound, I was constantly on the run! (Mahomet al-Rebel, Tripoli)

Taking Gaddafi's Compound made me feel much better - I was beginning to think we'd backed the wrong side! (W.Hague, London SW1)

I got better as soon as I found Gaddafi's Compound: it's a miracle cure! (Abdel Basset Ali al-Megrahi, address unknown)

We'll be trying Gaddafis as soon as we get our hands on some! (International prosecutor, The Hague)

I've had a dose of this medicine, and look what it did for me! (Hosni M, The Old Bazaar, in Cairo)

Goes down easier than my Compound ! (Sheikh Well, Bahrain)

I used to prefer Gaddafi's Purge
(Saif G, Su'un-in-the-Choki)

What's the time Mr Wulf?

Five to midnight.....

I have posted much recently on the craziness of current German policy. However with each passing day the situation is deteriorating. Mr Wulf is the German President who has questioned the legality of Eurobonds and the action of the ECB to date to stabilise Italy and Spain.

Now this could be acceptable if he was also saying, "lets get this overwith, default, deal with the fall out and start again." Of course, this is not what he is saying, instead he is appealing to the German public railing against reality. This the the same position as Merkel and Sarkozy proposing a Tobin tax they know will be vetoed by the British.

It is a poor state of affairs. Worse still, I am now forced to agree with Gordon Brown on something. He has said it is of the highest urgency that the G20 is convened to ehlp the world work a way out of the current mess - and on this he is absolutley right (what he thinks the solution is, I am less sure I will agree with...).

Meanwhile, the US is waiting on Ben Bernanke to announce or not announce a third round of Quantitative Easing. The hedge funds have seen what comes next and have the biggest short positions on the S&P since 2008. The issue is there is no magic bullet and many of the solutions the market is pushing for, Eurobonds won't work and neither will a 3rd dose of Quantitative Easing.

Five to midnight, not long to go now. Hope you enjoyed the summer....

Wednesday 24 August 2011

Uk shoppers most likely to complain in Europe.

KelKoo Survey.
Uk shoppers most likely to complain in Europe.

No real surprise there. Gobby lot, UK customers always used to be very keen to quote rights that didn't exist.

In fact its a long, long time since I've seen anyone in a store in the UK having a flair up argument with the management. Most UK firms go far beyond what is required in law to keep customers happy.
M&S famously didn't even require a receipt to exchange goods or get a full refund and had a no time limit return and exchange policy that it cut to a measly 90 days back in 2005.. Most stores have a 28 day policy. And that is pretty generous too because in UK law there is no time limit. You aren't entitled to return any retail item at all from the second you purchase it unless its not fit for purpose.

The article is the usual headline grabbing nonsense. {But the headline is the hook, right? That's why I used it too.}
96% of Britons in this certain situation would complain. As opposed to 95% of Germans and 91% of Italians etc.
But the article does make mention of the new EU Consumer Rights Directive.
This a directive standardising internet sales within the EU. This is a law coming into force within two years and was originally one of the daftest pieces of Euro legislation to be put before the parliament.

-items over €40, then the retailer would be responsible for paying the return postage costs if customer changes mind.

- Anyone selling to one European country must sell to all European countries.
- The retailer is responsible for the condition of items until the customer receives.
- Customer has 14 days FROM RECEIPT to change mind.

All of those were very stupid stipulations. At present plenty of UK small business refuse to post to Italy. That is because Italy is a nightmare for delivering goods and has a the slowest customs clearing on earth. Its often not worth the bother.
The €40 refund is just bizzare. Postage is sold by weight, not by price. For instance sending a €40, 3kg drill to France costs €30.00. If the retailer had to pay that return cost they wouldn't ship. {It might seem an odd thing but BQ industries had just such a product that mostly went to France and Ireland. The drill was discounted from €150} And as for the 14 days from receipt, who would know? Items don't have a delivery date unless they are couriered.

These rules were clearly made with big shippers in mind and no conception of the thousands and thousands of independent and small traders selling online.
The seller being responsible for the goods intransit is a bit odd as the deliverer is always responsible. If Royal mail smash up your parcel, the person sending the item makes the claim for loss or damage.

However, having been amended by MEPs its actually turned out pretty well. Some of the better ideas..

  • Increased price transparency – this means the online retailer will now have to tell you about all costs, for instance a UK online store shipping goods from Singapore will have to tell you about customs duties before you finalise your payment.
  • Banning pre-ticked boxes on websites – no more imposed insurance fees when booking a ticket an online, no more imposed newsletters, no more imposed extra warranty terms when buying a camera online, etc
  • 14 Days to change your mind on a purchase, goods or services
  • Better refund rights- retailers will refund consumers in full for the product within 14 days of the withdrawal. This includes the costs of delivery. In general, the trader will bear the risk for any damage to goods during transportation, until the consumer takes possession of the goods.
  • Eliminating surcharges for the use of credit cards and hotlines - no more extra charge if you book your flight ticket online paying with a Visa for instance
Well, the 14 days to change mind is ok, as long as the customer pays the postage back. Otherwise they would have more rights than a UK consumer has in the high street. No one refunds your petrol and parking for taking something back.

A mix, but much, much better than the original.

August 2011 Trading Update - gulp...

For some unknown reason I can't seem to upload my portfolio sheet to blogger today so I will do it in text form.

Basically, wow, is it gory. Main holdings this year are GKP, EMED and XEL. All of them have been smashed to pieces during the market volatility of the last 6 months. EMED is down about 25% from the beginning of the year (but over 50% from its highs), XEL about 60% and GKP 30%. Then my other smaller holding like Ascent and Xtract are also worse off, with Caza the winner had a mammoth 66% off its high and my worst ever buy. Only recently bought Chariot is up at all on the year.

However, partly due to the losses coming too quickly I have held on given that my strategy is to hold event driven shares, may as well wait for the events. This bit gives me hope:

EMED - Final permitting for their Spanish mine is due in September, as usual, there will be a delay, but the share price could easily double on the permitting news and in a better market would treble.
GKP - Have found another mere 4 billion barrels of oil this year whilst their share price has sunk. The key here is the Iraqi Oil law that will allow them to export and understand the price they will receive for their oil. Once this passes (and it has been nearly 2 years now....) the company will quickly be snapped up in a bidding war. Again potential for 100-300% upside from here.
XEL - this one I did get very wrong, XEL is waiting for DECC approval to begin operating the field they discovered in the North Sea last year. The shareprice has been hammered, down 70% from its all time high. However, with approval and a move to production a doubling or even trebling of the price is not beyond the bounds - but it will be 6 months yet.
AST (Ascent)- Great news this week that their onshore find is the largest onshore gas field in Europe. Company currently valued at less then £20 million. Huge buying opportunity really as the fraccing to get flow rates is about to start so confirmatory news will be end of September.
CHAR (Chariot) - Having finally found some JV partners, the exploration of their potentially huge fields off Africa has at last started. If the seismics are correct the company will be a big success in 2012. Have bought in at a low price having sold last year into it strength.
CAZA - Huge market over-reaction to a duster, still 3 wells about to announce commercial flow rates (albeit small in the grander scheme of things) should help the shareprice double from where it is today before year end.
XTR - Currently suspended pending a merger, drilling in the North Sea in September, quite make or break for the company although the merger will give it financial strength for a couple of years. Share price is 2.7p, any joy in drills and it could be 30p - so not one to invest a fortune in as even a small sum may eventually make great returns.

So in summary, pants. Portfolio value back to where it was last September having been more than double that in Feb this year. However, long-term plenty of good news to come at the share level - however macro issues might overshadow all.

Twitter Account hacked

sorry all, fixed now

Tuesday 23 August 2011

Gold bubbles away to $1900 and ruins the economy

Dubai Gold Futures twelve month chart

Gold marches onwards as the markets march down. There is plenty to be fearful of in the current world as far as investments are concerned.

However, Silver also experienced a massive run up earlier in the year and that did not end well. The issue is the short-term nature of the trades. Gold is popular as it goes up and markets down - the reverse can happen too when the hot money leaves gold for pastures new.

Now sharp minded investors like our own Nick Drew have done very well from Gold thus far, well enough that even a 205 or 30% pull back is not really going to trouble them. Longer -term though there is an unsustainable trend, with money pouring into low yielding Gilts and Treasuries and of course into Gold.

None of these investments is generating a yield or return above zero, in fact treasuries and gilts are loser as they sit below inflation in terms of returns. For now, with market risk seen as a big threat, that is OK - but long-term this must unwind as even the rich get poorer. Also, by denying money to productive investments the world will be denuded of growth and opportunities - it is in no ones interest to have this huge flight to safety continue ad infinitum. Stopping it is another thing though....

Monday 22 August 2011

Gaddaffi affect on oil prices could be crucial

 Brent Crude Oil

It is an oft quoted economic statement that a $1 dollar rise in the price of oil adds 0.1% to inflation over 2 years. The Libyan war added approximately 20% to the price of oil overnight. This has coincided with a very weak patch of the world economy.

There are many current parallels to 2008 at the moment; volatile markets, banks in trouble, leverage and debt issues to the fore and a macro economic collapse possible.

However, the role of the price of oil is not to be underestimated. In 2008 when the price of oil hit $147 a barrel a deep recession kicked off very soon after. The price of oil promptly collapsed and as a result inflation only spiked rather than went into over-drive; also the recession, whilst deep, was shallow (clearly QE and other externalities played a role here).

As the global price of oil has ticked up again through 2010 and now 2011, it is no coincidence that the Western Economies have faltered for growth. Oil is a key driver in inflation but also for manufacturing and transport. High oil prices create demand destruction in our economies as there is as yet no real replacement for it at a competitive price.

Real GDP quarterly growthNow with Gaddafi going and the market outlook driving oil downwards under $100 it may really help the Western Economies for the next quarter to stave-off another recession (a European Sovereign Crisis denouement may bring one one, but that is for another post). 

 Cause and effect are always hard to identify at a macro level, but the sudden rise of oil in 2008 is exactly before the 2008 collapse, as is the rise back up to today's levels also starting to affect the UK GDP growth of 2010.

Sunday 21 August 2011

The week ahead?

What a week we have to come. Gaddafi is not looking like he is going to last much longer in Libya. With him gone that will produce some downward pressure on oil prices and support to world markets. However, the Sovereign debt crisis is going to play put even more.

The markets are now trying to seek out the banks who are over-exposed to the European Sovereign debt and who may not be able to last another crisis. Worryingly, some of these are big names such as Soc Gen, Unicredit and Deutsche Bank. Without resolution things are going to stay very choppy at least, with potential crashes in the Market possible at any time they remain open.

Plenty to keep us all busy!

Friday 19 August 2011

Friday competition. David Starkey edition

David Starkey's media career was in jeopardy until he agreed to adopt a more 'youth-friendly, race aware, politically correct' attitude on his history programs.

"Yoh, you youth
You wanna listen to me
I know ’bout Hen-ree
And Anne B.
Ho, give her cherry

On Henry’s bone,
So he broke with Rome
And set off
The Reformation
Of the nation
Caused damnation
Raised taxation.

Hear my narration.

I'm 'em sea,

The Pope said
'Mary is now successor,
Henry was Lord Protector.
Now he's a defector.
"I'm no Conscientious Objector
I'm gonna put a crossbow bolt in his ass.'

Henry wasn't timid,
He was livid
So he dissolved the Monasteries

Listen to my commentaries."

Dr Dave.
Starkee M.C.

This weekends compo:

Best historical Starkey 'in your best rap culture' prose into the comments.

And C@W have even managed to scoop some video footage from M.C. Starkee's new, youth aware, musically in-tune, speak like it's spoken, program on

Henry VIII and the Tudors.

Thursday 18 August 2011

Tobin tax proposal to split Europe further

Very hard to ignore macro events at the moment. They are simply driving everything, looking at individual stocks is a bit of a waste and my own strategy (-40% YTD, gulp) is smashed to pieces as the event driven news that should drive my shares is immaterial in the face of global macro meltdown.

On this topic, I posted yesterday on the disastrous Merkel-Sarkozy 'plans' which have managed once again to set the market off on another set of falls. Along with poor UK numbers on inflation, employment (actually this not so bad, too many immigrants are making the numbers look worse - more on this later today) and Public Sector Borrowing.

The real challenge for the EU though is how is the Franco-German axis going to work? The UK is simply not going to sign up to a Tobin tax that will raise over 80% of its money from activities in the City of London to distribute to Southern Europefor the sake of French and German bond prices. No doubt then the new European State can attack perfidious Albion, but it still does not help the fiscal consolidation. Cameron is going to veto this EU clause and this is going to have the effect of pushing the UK to be even more euro-sceptic as the ire of demagogues in the new Axis falls upon the UK.

The Southern European states are going to tire of the German heckling too - there is real austerity in the PIGS and being told it is not enough and you have to do more by a Germany not undergoing any austerity is not going to wash forever. Only a change of Government in one and a decision to leave the Euro and get out of the fiscal mess and then the EU would have a real problem.

At times of crisis, what is needed is magnanimity by the victors (as after WWII) not bitterness (WWI). It is a shame that we are in this position, because I would have thought that Europe above all would understand these lessons.

Wednesday 17 August 2011

Germany and France close eyes and cross fingers

If you have not seen any of the Sarkozy/Merkel press conference yesterday you should at least look at the papers too see what they said. Such an underwhelming performance in a Corporation would have led to a Board meeting this morning and dismissal.

The market and journalists are asking for one thing; clarity that the Countries are committed to the Euro project as a whole.

Instead the answers given were concerned with Germany and France and silly stories about Tobin taxes and the horriblesness of the markets.

A gimmicky stance on the harmonisation of French and German tax rates was taken; but this is a signal for the greater integration of Eurozone Countries. What is missing from the Politicians is the understanding that this is a crisis. The answer in a crisis is not a 10 year plan for Eurozone integration, as there are not 10 years to save the Euro. There may only be 10 months.

Indeed, doomsayers like Ambrose Evans-Pritchard see remarkable similarities to this August and that of 2008 in Europe. He sees a failure to realise the crisis is upon the Euro today. France and Germany are big, but they are not bigger than the global markets and they and the more desperate Eurzone Countries are reliant on the markets for funding.

So, the question has merely been ducked for a few weeks, yet again. However, it does suggest to me that the very poor leadership that we are seeing will be the undoing of the Eurozone. neither Sarkozy or Merkel is willing to tie the future of their Countries to their currency which is an unsustainable position for a currency. The crisis will have thus have a nasty end. Perhaps, the Euro will be saved when it is realised that a disorderly break-up will ensure a decade long recession (for the UK too), but the speed of events versus the speed of political change is too jarring to make this the likely outcome.

Monday 15 August 2011

Letter From Singapore

So, off to Singapore, "the world's top-ranked economy for ease of doing business" (World Bank) to check out how the mighty C@W is faring in Asia, and whether Henry Porter is correct when he writes:

"we are going to find it much more difficult to face the world. The riots will be at the back of our minds for years to come and we will wear their shame for a very long time"

Actually of course my hosts (all Chinese) are far too polite to do a
nything more than ask some concerned questions; though the Straits Times helpfully notes that they, of course, retain corporal punishment for such occasions. Oh, and capital punishment. In return, I don't mention that in his first National Day address on TV, their new Prime Minister seemed a little nervous about whether Singapore can maintain its enviable successes for the future and promised, guess what ? ... new measures to curb unskilled immigration. S'porean jobs for S'porean workers, then. Still, we have to admit he's got a better starting-point than our own new-ish PM.

In the wake of Norway, Syria and of course Croydon, I wonder which world leader rests easy in his or her bed. Hosni Mubarak looks jolly uncomfortable in his. In my travels I am told that the lesson third-world leaders are taking from his plight and that of Gaddafi, is - ignore the West and do what you have to. (Singapore, lest I be misunderstood, is decidedly not third-world.) Then again, how many lectures will they be getting from Cameron any time soon ?

Anyhow, I am glad to report that the Asian edition of C@W is going down very well. This may have something to do with the ads we are running in our sidebar - see below. Stick to business, eh ?


Sunday 14 August 2011

The wrong target

It is very interesting seeing the media in the UK today. The Governemnt is paying the price for trying to use the Police as a distraction for the late return of all the Government ministers.

Interestingly the ACPO has some terrible points copied straight out of a lefty playbook. Basically the Tories cuts rare wrong, in fact it is much worse and the Police have real concerns over pensions and pay.

How does this impact Cameron asking a US cop for help?

Of course it does not but exposes the Police as an organisation run like a Union, obsessed with funding and internal management; no wonder the guys non the ground are unsure when the leadership is so abysmal.

For the politicians, they have made a poor judgement in fixing on the policen rather than broken society which be a better, more accurate, meme. Which would enable a discussion of what is wrong, much of which will expose the terrible mistakes of the last Government's policies.

Friday 12 August 2011

A right to bear arms?

Since the riots and looting, with the police initially unavailable and unwilling to intervene, vigilante groups formed to protect their families, homes and business. If the police can't protect us we must protect ourselves was the rally cry. Defending our society.

American friends were amazed. Astounded! "Why didn't you shoot them looters? Why did those cops just stand around eating donuts and scratching their ass? Take 'em down, you guys! Tear gas and shotguns and its all over in 5 minutes," and so on. And on the Norway massacre..well, you can guess.

This theme has been mildly echoed on blogs and in the comments of the papers.
The UK should allow its citizens to arm themselves and allow them the same rights as US citizens have.

During Hurricane Katrina National Guard were ordered by the Mayor to shoot looters. Whether they did, I don't know. Reports of widespread looting were numerous. Reports of murder and rape too, many later being found to be false. The point though, is that having an armed police, and home owners and soldiers didn't stop the looters there, which came about much like our own. There was no one there to stop them.

UK gun data is difficult to discover. It doesn't include Northern Ireland or Scotland. And world gun data seems to be way out of date. At the Millennium UK gun deaths was roughly 0.47 / 100,000 people. 210 total deaths. More in the countryside than in the cities. {There's just more guns in the country.} The disparity with the USA is amazing. If the UK was the population size of the USA we could guess gun deaths at 1,000.

In contrast the USA was 15.22 / 100,000. 31,000 deaths in 2006.
Non fatal injuries from firearms runs at some 200,000 a year.

Over half of those USA deaths are suicide. ½ % is accidents. So the figure is nearer 7.5 / 100k.
Hunting, very common in the USA, does not seem to result in many deaths.
In the UK gun accidents are so small as to be insignificant.

In the very rough areas like LA, as CU posted before, the sound of gunfire is as common as police sirens. In some states guns are worn openly, in holsters, as its legal, and no one really bats an eye. They are just an accessory like a phone.

My US colleagues tell me a gun is essential for home defence. Many of them have at least 2 and up to 10. For every intruder killed, there are four unintentional shootings. Individuals in a home with guns {50% of US homes have guns} are 4 times more likely to be killed than unarmed home-owners. Yet my US acquaintances would never give up their weapons. Every one has the right to defend their property. No one wants to be caught unarmed if the criminals are armed.
Which is a kind of circular argument, but seeing as the guns are already out there I can understand.

I doubt we're anywhere near ready to consider arming the people, even with terrorism and extremism as well as disorder. However Inspector Gadget supports the arming of the police. On the gun/deaths table that seems to raise death rates by firearms to 1 per 100k.
But should we do that? Wasn't it a shooting that was the excuse for all this rioting in the first place?
Or would armed police, with suitable powers, be a serious deterrent to the social disorder on the streets?

Thursday 11 August 2011

Friday fun comes early

Hazel Blears on Sky News -

"People needs to ask, why weren't these kids at school?"

er...middle of the summer holidays...ffs - she was a minister once, albeit a poor one.


"There will be an extra edition of Question Time on Thursday 11 August to discuss this week's riots. The panel will include John Prescott, Brian Paddick, Camila Batmanghelidjh, John Sentamu and Fraser Nelson."

OK, BQ is still trying to get Mrs BQ out of custody after the rioting (she just could not resist when it was Debenhams).

In the meantime for the rest of us, a summer treat. Question Time Special. Now of course we know that the questions are all going to be on the Riots. So the usual game is to guess which questions the BBC producers will allow Dimbebly to pick out at random from the live studio audience in London.

For added spice, a slightly different scoring system with a point for each correct riot question (e.g. itz all the Feds falt, innit?). We are going to be very strict, in line with new Cameronian DemoKracy so no answers like "Police", "Fatcher"

Double bonus for guessing the end question whether it be humorous or another topic. Bonus' for getting the relevant guests answers spot on (impossible with Prescott, obviously)

The panel itself if a terrible mix of mindlessness, incompetent idiots and batshit craziness. They have not even found a Government representative yet, if they even want to. At the moment it is 4:1 socialist loons vs reality so I expect much heat to be generated and little light. Maybe interesting to see whether the 'hand-picked' audience still buy all the lefty guff though or whether hang'em and flog'em gets the claps.

Get your entries into the comments before showtime.

Vote for Us and save yourself

In case you have nothing to do and are considering looting because,

"u iz lyk, bord"

Here is a small distraction that may allow you to redeem yourself in the view of soceity simply fill in the form and tell the world you could'nt be without us....

Click here to vote in the Total Politics Blog Awards 2011

Wednesday 10 August 2011

The Cost of Fixing the Price of Milk

Tesco's in a bit of a lather at being fined a few quid for price-fixing, then ?

And well might they be. Because hovering in the background is something more than just a slap on the wrist:

"The DGFT can impose a penalty of up to 10% of a company's turnover for the infringement of the prohibitions (section 36, 1998 Competition Act)... the turnover will be a company's UK group turnover for each year of the infringement up to a maximum of three years"

We'll be hearing a lot about penalties for misbehaviour of all sorts in the coming days and weeks. A slightly more retributive spirit in the air.

Think on, Mr Tesco, think on. (And you, Mr Goodwin, we haven't forgotten.)


UK Riots; technology and gangs

People loot because they can, why not get free stuff. in the markets today after days of panic wealthy people and computer programs are buying up lots of cheap, but quality shares. the last few days they were selling them as fast as they can; times change. In the of mass technology, they change very quickly.

However, the most amazing thing about the UK riots has been the use of technology. When used in the Arab Spring this is a good thing, in Eltham, not so much. It shows that the power of technology in a phone (which is the same as a Government department may have had 30 years ago in terms of processing) is enough that with a small bit of cunning it can be used to out-fox modern police forces. Last night, knowing police were going ot London, other gangsters in the Country saw their opportunity.

it is not great, because this may mean to enforce law and order we need more police; but that is a price worth paying to defend our Country.

Amongst motives, I am not seeing much discussion about Gang culture. When I lived in South Central Los Angeles as a young man you could not sleep at night for all the gunfire. The place was wild and the police did their best to keep non gang neighbourhoods from getting to involved. It was chaos. What I can see even on the TV is that young gangsters are responsible for the vast majority of what we are seeing. the gangs in different parts of London are competing to see who can make the most carnage (hence the fires).

Gang culture is not borne out of any real social deprivation, it is a cultural issue and policing issue. it is a culture which says if your hard and tough you can take what you want and get what you want - who is to stop you. You earn respect this way. The way to break it is to target gangs and gang leaders, much as we would target Al-Qaeda. it is the gangs that lead people astray. Without them, kids are not led into a circle of violence. I hope the politicians understand this and make Trident and other police initiatives a top priority. Guido notes the lack of fathers and bemoans social policy; this is half right - gang culture is a cult of the gang and individual respect. Much comes from Caribbean and American black culture where having a wife is simply not the norm (for good reasons too, the slave owners liked passive women working their plantations not rebellious and tough men, so the women outnumbered men 10:1 - hence after freedom a culture grew up where men did not settle and even the women accepted this or else 9/10 would be single). The final thing to note here is anyone can adopt gang culture, so it is not really a race problem per se, though ti may be that some groups have a bigger problem with it than others.

The biggest load of tosh I see written is this is about youth unemployment, few of the people I have seen rioting are even old enough to have left school - it is no coincidence this is the summer holidays.

Am I right? What do you think?

Tuesday 9 August 2011

Letter from Croydon

My father can tell you stories of when Croydon burned in the Blitz: as a Boy Scout he was a fire-watcher on the top of the tall tower at Mayday Hospital. He was in the army by the time of the V-rocket attacks: Croydon took more doodlebug hits than any other borough.

We've taken some hits last night, and the smell of smoke was still pervasive in the sunlit streets at 09:00 this morning - because two of the fires were still burning.

Reeves Corner, the venerable furniture store now famous beyond Sou
th London, was an entire block of ramshackle Victorian buildings filled with cheap sofas - a clever target for the arsonist, very clever ...

The fire in Broad Green that is still being fought (photo - sorry abt the quality) is possibly more significant. Croydon is an unbelievably 'diverse' place, probably because the Home Office immigration centre is here to which all incomers must report. You
can see fake passports traded openly on the streets of Thornton Heath (or Fort 'Neaf as we call it). However, no one ethnic group really dominates anywhere, which makes the whole of north Croydon a complex web of inter-ethnic stand-offs.

One of the strengths of the place is that most of the property is in private hands, the Council having long since eschewed public ownership of social housing (I may have had something to do with that ...). Private landlords, however dodgy (and let's face it ...)
do at least have a very real stake in their investments; and the Asian landlords who own a large proportion of the terraced houses are quite well organised.

Which brings us to the fires in Broad Green (the pic shows only one of several, the Telegraph has more), which is one of the few areas with a very clear ethnic character: it is Tamil. For years they have been mounting nightly vigilante patrols, and they don't mind telling you which racial group they have taken up their cudgels against: the group that makes intoxicated nocturnal forays out of the mean pubs and clubs of adjacent West Croydon. These particular blazes may turn out to be more than just a by-product of random looting: just a guess.

Croydon attracts all manner of derision, but we sort of felt - hoped - we had the dynamics of this difficult place more or less in a rough-and-ready balance. We'll find out how right - or wrong - we were.


pix © Nick Drew 2011

Here we go, here we go, here we go

Supposed to be going to the Footie tomorrow night with clients, expecting that to be called off this morning.

Anyway, another day in the UK and another day of blind panic and disorder - just the FTSE so far mind:

That is a pretty nice drop from yesterday's dismal close. There is panic in the markets and more importantly there are robots and margin calls. I think the combination of these two is not working out so well. The robots sell and buy to increase the size of the waves, which in turn force more margin calls on leverage investors - which has driven volatility up to 2008 highs.

Clearly, the macro picture is not helping and with civil disorder across the UK even without the impending collapse of the Euro and Dollar the markets would be down three figures today in any event.

Cant' see anything that is going to end this anytime soon; good sign that as a contrarian indicator. Mind you I thought yesterday would be the ow-off capitulation so my judgement is not to be trusted at the moment.

Monday 8 August 2011


 FTSE down 3.39%
DOW down 5.5%
NASDAQ down 6.9%

FTSE futures at -200 for the morning.

Croydon burns, hope Mr Drew is still in Germany.

Only Monday too. they call August the Silly Season - a very odd kind of silly this year's vintage.

War of All Against All

In the heady days when Ed Miliband was energy secretary, he vowed he would make it socially unacceptable to oppose windfarms.

He failed.

Now, ministers have declared war on charities that seek to thwart their puny wills on planning matters.

Did you ever hear anything that smacked more of a losing argument ? There are many charities whose entire raison d'ĂȘtre is to put a rocket up the governmental backside. I look at my TV screen** and there seem to be battles aplenty to be fought of a more pressing and fundamental nature.

Withhold government money from the recalcitrants, by all means: but have a little care when taking on the National Trust and the CPRE.


** update: make that - look out of my windows

pic © Nick Drew 2011

The EU Guns of August

Was it enough, the ECB ( an institution without the support of its member countries) has been pushed yesterday into buying Italian bonds, this will help the market.

At time of writing the FTSE futures have come in from -150 to -80. Not sure we will get a bounce after the US Downgrade, but maybe the steep falls will be halted.

For a while, because the ECB has no real ability to do anything with these bonds apart from monetise them in the long-term. I don't even know where it is supposed to pretend to get the money from to buy them. Rather like the Federal Reserve, is is somewhat opaque...

So are who is buying/selling/short/long - what is your strategy?

Update later as the day progresses....

UPDATE 11am GMT: Well that rally did not last long, the FTSE is now down 1.5% on the day having nearly made it to positive. The EU is buying Italian and Spanish debt and the Far East closed down plenty. Oil seems to be up as Goldmans issue a note saying stay long and strong.

Sunday 7 August 2011

If The Meltdown Doesn't Bankrupt Us, Huhne Will

Might seem a bit parochial to be posting on UK energy policy in the circs, but hey, perhaps a modest distraction ...
We've posted briefly before on Huhne's electricity White Paper, and commenters noted how bizarre are the numbers he claims on future electricity price increases.

Stating that his 'reforms' will save households £40 on their bills by 2030 is a completely brain-dead thing for him to do (though Coalition MPs have all been solemnly briefed to repeat this to constituents as though they believed it): and anyway the numbers are all coming apart at the seams.

It all depends on a fragile set of assumptions, in particular that the wholesale prices of both oil and gas will rise strongly, at the same rate, over the 20-year period. This is followed by some detailed (and easily challenged) hanky-panky with the counterfactuals.

However, the main flaw lies in the gas price assumption. If gas were to rise less steeply than oil the whole edifice falls apart. And there's good reason to believe this will happen - so good, in fact, that the DECC wallahs have felt obliged to run a few cases on that basis. And - lo & behold - they can easily come up with scenarios that show electricity prices 52% higher by 2020 as a result of the 'reforms'. And those are just the scenarios they feel inclined to share with us: how about if GobalRecession2 trashes the prices of both oil and gas ?

Of course, every man jack now wants subsidies. The generators have long since realised they can issue ransom notes at every turn: and now the manufacturers are in on the act. The 'fuel poverty' lobby will soon be demanding free fuel for hard-working families.

This is the way to a third-world energy economy (to accompany the rest of our fast-degenerating situation) where every aspect of pricing, investment and power-plant operation is dictated centrally. We've been there, done that & got the CEGB T-shirt. And a pretty disreputable garment it is, too.


Pic and caption: DECC website ! Taking the piss - or what ?

Saturday 6 August 2011

S&P, US Rating, China and grasp for credibility

Quite a busy week and still the news pours forth. All is positioning now after the markets have had their say;

S&P hs downgraded the US economy from it's AAA rating. It has done this because it said it was going too and is still trying to re-build it's reputation afternthe pathetic performance during the 1st credit crunch. They know this will upset the US administration and think this shows their independence. Yet without the other agencies joining in their reasons are transparent.

The US Government is also seeking credibility after a shambles of a week. They will go for S&P bog time I think as Obama must fear looking so powerless.

China too is getting in on the act, calling for a new world currency and flexing its muscles. China is in a bad spot really, having cheated to it's economy by holding down the Yuan it had to build it's stock of US debt; now they fear the comeback of this debt being unenforceable.

These power plays are most interesting to watch - have I got the dynamics right?

Friday 5 August 2011

Germany on verge of declaring War in Europe for a 3rd time

extreme headline, but sadly to all intents and purposes true. As I have written previously Germany has its cake and wants to eat it.

Low exchange rate and competitive position, thank you very much. Finds out Spain and Italy are in need of help, for the opposite reasons and Merkel stays on holiday, by all accounts having told the European Central Bank head to get knotted; which he helpfully told the market yesterday.

I can see why too, Trichet must be exasperated at the position. The Euro is a SINGLE CURRENCY for Europe and as such needs to be defended by ALL its members. Refusal to help out when the going gets tough is unacceptable. It is a betrayl of the European Union which Germany was the main driver of in the aftermath of the terrible World Wars of the 20th Century.

All of Italy, Spain, Greece, Portugal and Ireland are going for UK levels of austerity or worse, it is not as if they have not come up to their side of the bargain in the course of 2011.

So who has not? It is Germany (with small allies in Holland and Finalnd), unwilling to will the measures to make the currency whole. The only alternative is break-up and let's face it that is going to cause a global 1930's depression. All the big UK banks will go bust or need a bail-out - how can we afford that?

This is a crisis and only one actor has the power to stop it steamrollering forward, if they don't .......sigh.

Thursday 4 August 2011

Ftse plummets

FTSE plummets as investors run scared from eurozone crisisEuropean Commission president José Manuel Barroso

Jose Manuel Barroso: urged "a rapid reassessment of all elements" of Europe's bailout funds

On our recent "how far has the can been kicked" Eurocrisis compo ... who had fourteen days?

Swiss can get free ride bonus on International FX speculation

Switzerland, what a country. The safe haven par excellence and yet one which has no real reason to be so, as Izabella Kaminska noted recently.

yet the price for being a safe haven in these troubled times is a rapidly appreciating currency that threatens to bring deflation to an already slow growing Swiss economy. Their exports are dropping and even the intervention of the Swiss Central bank yesterday does not seem to have fixed perceptions.

In a time of such global instability and European Crisis, what are the Swiss to do?

Well one option is to fight the debtor countries with their own medicine. They want more Swiss francs so make them available, but not via the Banks. Instead, a reward for being Swiss, the Government should mail cheques for 5,000 CHF to every taxpayer and let them do what they like with it. After all, most will put it in a Bank and therefore it will enter the banking system, if it is spent it will ward off the internal deflationary threat.

In addition, this unsterilised monetary liquidity will warn speculators off unwarranted holding of Swiss Francs. Switzerland has monetary reserves of about 12 times the amount offered out so this should cause an 8% odd devaluation in the markets, but no doubt it will be more as Switzerland impairs its reputation for its own good.

This way, Swiss people win by getting real money to spend for free - a tax on international speculation in reality, and the Country gets its financial house in better order.

Wednesday 3 August 2011

UK Defence spending too much, not too little

Much is being written by MP's and otehr today being highly critical of the cuts to the UK armed forces. Almost all of this is entirely disingenuous. The real 'cuts' to the budget over the next five years amount to less than 7% of spend - see here for the details. £45.6 billion is spent this year and £44.3 billion in 2015.

To all intents and purposes the spending is the same. The changes are caused by the huge cost of aircraft carriers and other large programmes enforcing cuts on the RAF and Army.

the cost of Libya etc is always met out of central funds so this is not excuse. What he MP's are actually calling for is an increase in defence spending to cover the procurement costs of the Carriers whilst maintaining everything else.

My view is that these people are all nuts. See below the graph of defence spending - the fear in the 'Telegraph' etc is that we are not a front rank nation anymore. Well, good I say, in fact, Japan seems to do OK and Germany too with 30% and 20% less spending than the UK. South Korea manage to spend as much as us and they really are threatened with a major war. The UK is fast falling down the GDP ranking of the world's nations and our spending should refelct this.

The sensible thing for the UK to do would be to reduce defence spending down to 2% of GDP - a good 20% cut more than is envisaged. This can be done by scrapping Trident for a cheaper system or through other cuts.

The benefits will be doubled too. With a smaller military, Politicians would be forced to curb their enthusiasm for crazy wars like the one in Libya - so there will be savings from the general Treasury fund too. It will indeed force an ethical foreign policy on the UK.

I note too, that Ireland and Iceland, our Atlantic island brothers don't see the need to spend any more at all on armed forces. It is well past the time that Britian got over its addiction to acting big on the world stage - we can't afford it and it does not do us any good in any event.

Meltdown ?

Back to business: it's looking ba-ad. Alphaville calls a meltdown and who's to say they are wrong.

Back in 2008 we wrote that the dominos fall in slow time: Sackerson responded then that at least that gives one time to do something. They started falling in 2007. What have we all done in the last 4 years ?



Expanding the TA: Must Be Done Right

David Cameron reckons the expansion of the numbers of the Territorial Army that can be deployed on operations is something to boast about - as opposed to getting defence on the cheap, which might be suspected. "Our plan to increase the trained strength of our Territorial Army from 14,000 to around 40,000 in the next few years is something that all Conservatives can be proud of", quoth he.

As it happens, this seems to me a broadly feasible objective. But it has to be done correctly if it is not to be merely a numbers game. Becau
se here's the basic truth: reservists don't make good 21st century infantry.

Of course, almost anyone who can be taken to one side and given 6 months training in formation can make the grade: whole armies have been raised in less time and infantry skills are not rocket science. That's not the point. The point is to use reservists in those roles where they bring specialist and directly useful skills to the party without needing extensive training: in the words of last summer's Future Reserves report:

"Employing Reservists as specialists is a cost-effective way of importing civilian expertise rather than replicating expensive training pipelines."

Thus, medics, HGV drivers, helicopter pilots, civil engineers, linguists etc etc can be ideally placed to make tremendous and cost-effective contributions with relatively little purely military training.

But not infantry. Why ? Because modern conflict requires that infantry be trained in formation, for manoeuvre warfare. This can't be done at weekends. The Army long ago realised that TA tank units made no sense, and the same is true of infantry.

Now folk will rightly laud the performance of TA infantry, deployed in penny packets, in many a recent conflict. So will I: but it doesn't alter the basic point, because they have been taken aside for several months training beforehand: they don't deploy as formed units. It may also fairly be pointed out that 10 Para was a redoubtable outfit (it certainly was: headbangers all, just like their regular counterparts), and that the TA SAS squadrons are frighteningly effective (they are - but they are virtually full-timers, truth be told). But these are not the thousands or more of which Cameron speaks.

So - beef up the number of ops-ready specialists, and we'll be well served. Oh - and whatever you do: don't even think of deploying reservists against rioters and strikers in Blighty, as some have suggested. That really would be the beginning of the end.


Tuesday 2 August 2011

US Bill passes into instantaneous tedium

And how quick do the markets move on? It is amazing these days of how much sentiment turns on a dime, one day this will cause a big rally, the next everyone is wisely saying it is all in the price and there are other things to worry about.

It makes the idea of trading a joke as it is so hard to predict anything; better to stick with longer-term investments. I see the banks are this seeing this too with big turndowns in Investment Banking trading profits at HSBC and Barclays announced today.

The world is a volatile place at the moment and the financial stimulus that has been unleashed is going to keep it that way for years to come.

Monday 1 August 2011

Gold etc etc etc - Safe Havens for Troubled Times

The FTA has solicited views on what might be a safe haven for such assets as you have left. Sitting back and watching gold contemptuously dismiss the American 'compromise', as a service to our readers here's a summary of the answers, clustered for ease of review. Never say we don't look after you.


- just about any asset not US based will do - the safest thing in the entire world is surely a bouncy castle (nice one, Izzy !) - education/schools in developing nations - family - invest in human capital: invest in your children - secure white-collar private sector employment with annual pay rises that outpace inflation - t
he most effective flight to safety is the one picked as consensus


- cash - japanese government bonds "but FX hedge is needed!" - Bitcoin - Singapore Dollar - Australian Dollar - US dollar - SEK - Renminbi savings account - New Reichsmark - Swiss Franc - Terra Trade Reference Currency - gilts - SDR version 2 - New Currency (could even be a parallel currency to say the SFr) managed by responsible people [sic]

Equities etc

- global mega caps Microsoft, P&G, Philip Morris, etc - Moody’s 20 Cash Kings - Mongolian mining stocks - Sturm Ruger & Co - The Ocado business model - poundshops


- silver - gold - basic products like food, and drink, internet services - energy - turnips - coffee - chocola
te - rare earth minerals - copper - oil & gas - Dominos Pizzas - Apple iphones - prime London real estate - land


- farmland - cows - mixture of deciduous and coniferous woodland - mixed use agricultural land - assault weapons - tinned beans and digging a deep bunker - safe houses - solar - literally bunkers - food stores - small farm in Canada with (golden) cows - a croft in Sutherland, Scotland with it's own Irn-Bru still and water rights

Broader perspectives, *ahem*

- inflation adjusted stupid-government-insured CDS, with also synthetics and squareds available - human urine - whiskey - Hermes ties - Irn-Bru - dope - grade 1 opiates - Hershey's Nuggets - constant maturity put options on Bove's strong buy calls - doughnuts - beer - booze and wine - creme eggs - teenager-backed bonds - a giant floating mattress in the Atlantic

= = = = =

Well, there you go. No financial advice here, of course ...